Rolls royce anual report - Coursework Example

The external auditor of the company has given an opinion according to which the group financial statements of the company present a true and fair view for the financial year ending December 31, 2012. The auditor reports states that the group financial statements are adequately prepared in accordance with the International Financial Reporting Standard (IFRS) and Companies Act 2006. It is also mentioned in the audit report that the financial statements of the company have been prepared in accordance with the Generally Accepted Accounting Principle (GAAP) as adopted by European Union.

The audit report forms an integral part of the financial statements of a company, especially a public listed company. The primary purpose of the audit report is to bring into the knowledge of the users of the financial statements whether these financial statements are prepared in accordance with the applicable financial reporting framework. [Readyratios.com (2011)] Users of the financial statement usually do not have the time to thoroughly analyze the authenticity of the financial statements.

They take reliance of from the audit report that whether the financial statements are giving a true and fair view or not. . 69% 3% Current ratio 1.33 1.2 1.70 Inventory turnover period 109 days 112 days 50 days Payables’ turnover period 247 days 262 days 20 days Gearing ratio 1.967 2.634 4% P/E ratio 7.1 16.43 9.0 x Answer to Question No. 4 2012 2011 Variation % variation Change in million ? Sales 12,161 11,124 1,037 9.32% Rise Operating Profit 1,373 1,186 187 15.77% Rise Share Price (pence) 874 755 118 15.

66% Rise Answer to Question No. 5 During the current financial year, the return on equity (ROE) has considerably increased during the current financial year. The return on equity is calculated by dividing the net profit attributable to shareholders by the shareholders equity. [Investopedia, 2012] The ratio is quite essential from the investor’s point of view as it represents how well a company is earning on its shareholder equity, which mainly comprises of issued capital and retained earnings.

The ROE of the company has increased during the financial year 2011 which is due to the fact that the net profit of Rolls Royce has increase by a staggering 170% as it increased from 848 million to 2,295 million. The main reason behind this increase in the net profit is one unusual item of 669 million which is due to the disposal of a segment of the business during the current financial year. It would also be worth mentioning that the sales and operating profit of the company has increased by 9.

32% and 15.77% during the current financial year. These escalations in figures have further accentuated the return on equity during the current year. The ratio is better than the industry average which is a sign for positive financial outlook. The gross profit has increased marginally during the current financial year. The reason behind the marginal increase in the gross profit margin is the fact that